Bitcoin bot malfunctions at BTC-e, insanity ensues

A chart from BTC-e showing the volume spike on the BTC/USD trading implement on Aug. 31, 2014.

Own work

On Aug. 31 at around 2:00 a.m. EDT, the Bitcoin exchange rate began to drop. Shortly after this, at least one trading bot at BTC-estarted behaving erratically, seemingly caught in a loop of buying and selling to itself or other trading bots. The details are not yet known, but the activity caused the exchange rate to drop from a local maximum of $500 down to $472 over the next 12 hours.

To illustrate the difference that the bot or bots have made, BitcoinWisdom shows that the 24-hour trade volume on the BTC/USD implement was 41,191 Bitcoins, while the total for the past week was 54,875 Bitcoins. The average for the other six days is therefore 2,281 Bitcoins, meaning that the bot activity spiked trading volume by 1,706 percent above its expected value. By comparison, the Sunday trading volume was 16,736 Bitcoins on Bitfinex and 12,245 Bitcoins on Bitstamp.

As a result of the activity, the exchange rate at Bitstamp dropped from $504.49 to $473.33, the exchange rate at Bitfinex dropped from $520.27 to $471.65, and the exchange rate at Huobi dropped from the equivalent of $503.05 to the equivalent of $473.21.

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Matthew Reece holds a physics degree from the University of North Carolina-Wilmington. A student of many other fields, both related and unrelated to physics, Matthew has a firm grasp of and writes articles about many subjects. As of late, Matthew has taken an interest in philosophy and economics.
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